Malaysia Matters Podcast

Keeping Malaysia’s economy growing continues to be the focus of Najib Razak:

Malaysia is open to taking additional measures to boost the economy, Deputy Prime Minister Najib Razak said on Tuesday, days after the government waived import duties on raw materials and unfinished goods.

Najib, who is also Malaysia’s finance minister, said he was reasonably confident that the country would meet its economic growth targets for 2008 and 2009.

‘We are very open to additional measures that can be taken from time to time. Obviously we are watching and monitoring the situation very very carefully,’ he told reporters.

Razak seems to recognize that gradual liberalization is the best strategy for keeping Malaysia growing in these uncertain economic times:

In an effort to revive the stock market, which has fallen almost 40 percent this year, Najib said last week he would relax ownership rules that reserve 30 percent of companies for ethnic Malays.

However, he said on Tuesday a final decision has yet to be made.

‘There is no announcement in that regard. We are open. As I said it has to be a pace of liberalisation that we are comfortable with,’ he said.

‘There is a need for us to be competitive globally. There is need for us to examine how we can overcome the current financial crisis. Gradual liberalisation is something that we will consider.’

Earlier this month, Najib, who will become prime minister in March, shifted almost $2 billion in spending to infrastructure and tax cuts from savings in fuel subsidies.

The United State is an important trading partner with Malaysia and efforts to increase investment and spur economic growth would benefit both countries.  These efforts might also lead to progress in the stalled trade talks.

The top job is seemingly Najib’s to loose. But criticism of the government’s handling of the current economic condition exposes an area where he must be careful. In response to prodding that he should show more leadership, Najib has said that a plan will be unveiled along with the 2009 budget this Tuesday, November 4^th. Simultaneously, he is playing down the impact that economic news from abroad is having on the Malaysian economy. Najib…

…reiterated that Malaysia would not face recession this year and the gross domestic product would remain around five per cent.

He noted that in the last two or three days, the volatile global financial market had seen many countries being affected financially and economically.

“We should be grateful that the pressure on Malaysia is not so bad compared with other countries.”

But Najib needs to be careful. His own government - Badawi himself – recognizes the need to tighten the belt a bit.

A 1.7 billion ringgit (470 million dollar) deal to buy 12 military helicopters from Eurocopter because of the bleak global economy.

“At the moment, we have decided not to purchase the helicopters. We need to delay it … because of the financial crisis. We need to have money,” Prime Minister Abdullah Ahmad Badawi told reporters.

Abdullah’s decision to scrap the deal for the 12 Cougar EC725 helicopters awarded to the European company is one of the government’s first major cost-cutting move as it re-prioritises its budget to cope with the worsening global financial crisis.

“We just cannot be borrowing every time. We need money. The best thing to do now is to reallocate our budget,” said Abdullah, who is also defense minster.

There is much that Najib might get wrong, but still get away with. Mishandling the government reaction to the current economic crisis is not one of them.

Next week’s announcement will be critical.

In a clear attempt to curry favor amongst the Indian electorate, Malaysian Prime Minister Abdullah Ahmed Badawi orchestrated a pre-Deepavali festival release of ten Indian protesters that bad been arrested late last week while presenting a petition at Badawi’s office for the freedom of five activists that have been jailed since November of last year. Their group has been outlawed for about a month now.

As reported by the Economic Times:

Those held included K. Shanti, wife of Hindraf chairman P Waythamoorthy, who is in self-exile in London, and their six-year-old daughter Vwaishhnnavi. Shanti was released on police bail Thursday night and Vwaishhnnavi left with her, official news agency Bernama said. 

A police spokesman said all of them were freed to enable them to celebrate Deepavali. “Although the police, under the law, could extend their remand orders to facilitate investigations, yet on humanitarian ground they were released to enable them to celebrate the festive occasion,” the spokesman added. 
‘ 
Home Minister Syed Hamid Albar last week said in an interview that the action against the banned movement should not be construed as a clampdown on Indians orHinduism. The action taken so far, he said, was simply because of their association with militancy and their extremist views. 

Badawi spoke to a group on Sunday saying: “In the spirit of Diwali, that good will always prevail. Malaysians must remain together and not allow extremist groups and individuals to cause tensions to rise. “We are mature and united enough to recognise that the vast majority of Malaysians, regardless of race or religion, all aspire to achieve the same objectives for our families and for our country.”

Aiming to prop up some companies deemed undervalued, the government earlier this week announced that it would utilize the national pension fund as the source for a loan that would pump 5 billion ringgit ($2.1 billion) into the Malaysian stock market. This would double the resources available to ValueCap Sdn. Bhd, a state agency chartered to invest in the stock market. 

But critics argue that risking pension funds in the marketplace is unsound and that there is too great the potential for conflict of interest associated with companies well-connected to the government.

A call for greater transparency of Valuecap’s business practices was a concern raised by Lim Kit Siang, head of the opposition Democratic Action Party, who was reported to as saying that  ’Valuecap has operated in secrecy since it was set up in 2003 and that its accounts have not been audited.’

This are the people’s money. In order to ensure that this is not a bailout…there should be a public scrutiny’ of Valuecap’s accounts, he said.

Anwar rebuffed the plan saying that the impact would total 1% in market equity and no real effect. 

It ’serves no logical purpose other than to prop up some companies in the stock market,’ he told reporters in Parliament.

In his first big decision since becoming Finance Minister last week, Deputy Prime Minister Najib Abdul Razak announced that Malaysia would not re-peg the ringgit to the U.S. dollar despite calls by former Prime Minister Mahathir Mohamad who proposed it necessary to do so on Saturday to mitigate the impact of a declining dollar.

“I wish to categorically state that we have no intention to re-peg the ringgit now or in the future. We are committed to allow the market to determine the value of the ringgit,” Deputy Prime Minister Najib Abdul Razak said.

He said it was impossible for Malaysia not to be affected by the financial crisis in the United States as 20 percent of Malaysia’s exports go to the U.S. market.

Mahathir pegged the ringgit to the dollar in 1998 at 3.8 to the dollar during the Asian financial crisis. It remained there until 2005 when Abdullah Ahmad Badawi removed the peg. The ringgit is now about 3.4 to the dollar.

Najib is reportedly meeting with US fund managers in New York this week. 

It is interesting to note that a couple of Anwar’s victories this year also mark points of downward spiral in the Malaysian economy. 

… the cost of insuring Malaysian bonds against default has risen sharply since Anwar’s coalition took a over a third of the seats in Malaysia’s election in March, increasing political risk. The 5-year CDS stood at 140.96 basis points on Monday, up from 91.85 on March 7, the day before the election.

That means it costs almost $141,000 to insure $10 million of Malaysian bonds against default.

According to Bank Negara’s latest statistics, some US$1.1bn (about RM3.8bn) of foreign funds exited from the country during the period Aug 15-29.

The exodus of foreign funds have plagued the weakening ringgit. Besides, a stronger greenback has also contributed to the departure of foreign funds.

Since the dollar began its upward trend in late July, the ringgit has been steadily on the slide. With the local currency going downhill, coupled with the lacklustre performances of the local markets, it is natural for profit-minded foreign investors to move their money elsewhere.

The ringgit has depreciated by about 6% since late July, from RM3.25 to RM3.45 to the dollar, with short-term prospects less than optimistic.

The highly unpredictable domestic politics and sluggish growth have gloomed the outlook of local markets among foreign investors, while the central bank’s decision not to increase the interest rates in late July has further consolidated their determination to withdraw from the country.

One of the first things that Anwar did after being released from prison in 2005 was attend meetings in Turkey with Prime Minister Recep Tayyip Erdogan and his advisor Ahmet Davatoglu at the behest of their Justice and Development Party (Adalet ve Kalkınma Partisi, or AKP). Anwar’s pro-Malay, Islamacist rhetoric has been previously covered here, but relationships with like-minded individuals must be noted as well. Only a month ago, Erdogan and the AKP vary narrowly avoided dissolution in a split-vote constitutional court ruling that found that Turkish secularist principles had not been violated.

But secularists within Turkey remain unconvinced.

In spite of Turkey’s strides towards westernization and the possibility of EU membership, the AKP is a protagonist of ethnic and religious derision. Erogan’s advisor, Ahmet Davutoglu provides a basis for this concern as a concept of governance. Davutglu writes: “The world is composed of cultural blocs, and Turkey falls into the ‘Muslim bloc.’”

From the US perspective, Turkey under Erdogan has proven to be a difficult strategic partner in the war on terror. Does the condition of the US relationship with Turkey foreshadow a decline in the US-Malaysia relationship under Anwar?

We already know that Anwar perceives Malaysia to fall within the “Muslim bloc.”  And so, in the context of the war on terror, the US must question what ground will be lost as Anwar pushes Malaysia closer to Sharia and farther from the West.

Reports of early results show Anwar winning by a landslide in the by-election contest over the parliamentary seat his wife gave up. 

IHT is reporting that, “With 18 percent of the vote counted, Anwar was leading by 5,855 votes to 1,910, according to the Malaysian Election Commission.” Anwar’s chief information deputy has declared victory and said Anwar: ”We are entering Parliament with a clear agenda and they [ the governing coalition] should wake up with the stark realities of the day.” 

If the numbers hold firm, Anwar’s claim that there there has been a mandate for change will carry enough weight to make real the potential for sufficient defections from the National Front to bring the PKR into power. He needs 30 to do so in order to accomplish this by his stated date of September 16th. 

Tricia Yeoh, director of the Center for Public Policy Studies, said she believed there was enough infighting and disaffection within the governing party that these defections were feasible. But Anwar’s opposition movement is still young and its unity could fray if it moves too quickly into power, she said.

“I do think they have sufficient numbers,” Yeoh said of Anwar and his allies. “The issue is whether it’s the best and most strategic move for him now.”

Anwar’s coalition is a precarious balance between a those representing ethnic minorities and hard line PAS, who seek an Islamic state.  Anwar’s winning argument, something both factions can agree upon is an anti-corruption message.

“One of the things that has held this country back is the issue of corruption - resources are not being distributed in a way that is fair to the vast majority of people,” said Bridget Welsh, a specialist in Malaysian politics at the School of Advanced International Studies of Johns Hopkins University in Washington.

But it is questionable whether Anwar, who himself has a checkered past, can be relied upon to match virtue with rhetoric. And minorities should be extremely concerned about his underlying interest in an Islamic state. The record indicates that to be the direction he would lead.

The fight for Malay hearts and minds is in earnest in Permatang Pasir and Penanti state constituencies, were Malay voters make up 68% of the total 58,459 voters.

As reported by the Star Online, PKR leader Datuk Seri Anwar Ibrahim kicked off his daily campaign with a visit to Kampong Sama Gagah market where party workers gave away curry powder to market-goers. 

Later in the evening, he attended a dinner with the Chinese community in Seberang Jaya before making an appearance at his nightly ceramah perdana in Mengkuang Titi.

Leading the Barisan camp was Prime Minister Datuk Seri Abdullah Ahmad Badawi who made a brief stopover at Kampong Permatang Ara, Permatang Pasir, just before midnight on Thursday to give moral support to party workers and meet villagers who came out in droves after hearing that the national leaders were in the vicinity.

He spent almost one hour mingling with the villagers and even enjoyedpulut (glutinous rice) with salted fish, showing he is still very much akampung boy at heart.

Coming into the final stretch of the by-election campaigning, both the NB and PKR election workers have increased their door knocking campaign as well as attendance at evening ceramah in an effort to touch as many voters as possible.

It is widely believed that Anwar will win a seat in parliament. The question will be whether the margin is significant enough to be declared a mandate for change in the government.

Anwar’s recent anti-semitic remarks gave us pause and cause to take stock of the man and another look at his record and past associations. It is of paramount importance that both Malaysians and Americans understand the dangerous implications of a Malaysia ruled by Anwar Ibrahim.

As is pointed out by Ganesh Sahathevan of the The Terror Finance Blog, “many Westerners believe Anwar to be a liberal who would prefer the rule of civil law rather than Sharia. This belief is often relied on to argue against any evidence of his involvement in the financing of terrorism , or at the very least, structures that lead to acts of terrorism.”

But the evidence of involvement with those connections can’t, and shouldn’t be ignored - especially by Americans (including Gore) who seem to be drawn in by Anwar’s ‘underdog’ status as opposition leader and choose to ignore facts about his past. 

His role in founding the International Institute of Islamic Thought, and the IIIT’s subsequent financing of jihadist and Islamist organisations known to be involved in acts of terrorism should set off alarm bells.

For instance, during Israel’s action in Lebanon, Anwar’s commentary in the press was very pro-Hamas and anti-Israeli. It would seem that associates of his put that sentiment into action. A board member of Anwar’s IIIT, Sheik Yusuf Al-Qardawi, “for whom Anwar has great admiration, ” is the likely founder and leader of the “Union for Good,” an association now banned in Israel because it is a de facto Hamas support network.